Tax on my rental when I sell
Hello, My property is in Laguna Niguel CA. I purchased a 3 bdrm condo for $365,000 in Dec 2009 with 20% down. I now have a 4% loan but pay $280 in HOA fees monthly. I did about $16,000 in improvements - paint, carpet, remodel kitchen, new AC etc. I lived in it for one year and then started renting in Jan 2011. I started renting at $2,175 and now the rent is $2,330. In December 2012 I got a new 20 year 4% loan. I have a small cash flow now but was negative for the first 2 years renting. Each month about $800 is retired from the loan. According to zillow the property is now worth $542,000 (costal property big appreciation).
My tennants lease will be up next year at the end of April. Currently I am leaning towards selling at that time but I am concerned about taxes. Since I did not live in it for 2 years I assume that all my gain will be capital gains. I think my tax bracket is normally around 28%. But what if I have an additional $120,000 gain from the sale next year. I'm assuming that would kick me up a tax bracket. I'm considering taking time of my job - maybe don't work all of 2015. Then when I sell in 2015 my only income would be about $20,000 from interest/divedends and the $120,000 gain from the condo sale. Does this make any sense? I'm not that savy when it comes to taxes. Any thoughts on how to save some tax money would be great.